Europe midday: Stocks in the red as oil drops below $32 a barrel again

European stocks edged lower on Monday as oil prices slid and following softer-than-expected data on German business sentiment.

At midday, the benchmark Stoxx Europe 600 index was down 0.4%, while France’s CAC 40 and Germany’s DAX were both down 0.2%.

“Markets have started the week tentatively, with European equities following oil prices lower, giving up some of the gains seen late last week. The correlation between oil and equities remains a key driver for markets as investors expect lower oil prices to force sovereign wealth funds to divest rather than invest,” said Rebecca O’Keeffe, head of investment at Interactive Investor.

Markets rallied at the end of last week after European Central Bank chief Mario Draghi hinted that further stimulus was on the cards. As a result, investors will be paying close attention to the Federal Reserve rate decision on Wednesday, as well as the Bank of Japan’s monetary policy statement on Friday.

Energy shares were among the worst performers, with the Stoxx 600 oil and gas index down 1.8% as West Texas Intermediate fell 3% to $31.23 a barrel and Brent crude dropped 2.6% to $31.34.

In corporate news, 3i was a high riser in London following upbeat research notes from Societe Generale and Barclays.

B&Q owner Kingfisher was in the red after announcing a five-year transformation plan aiming to deliver a £500m sustainable annual profit uplift by the end of the programme.

Siemens was little changed following a media report the industrial group has agreed to buy privately-held US engineering software firm CD-adapco for close to $1bn in cash.

Lloyds Banking Group was under pressure after JPMorgan cut its price target on the stock.

BT Group was also under the cosh as MPs called on the company to spin off its broadbank network.

On the data front, investors digested a weaker-than-expected reading on German business confidence for January.

German research institute Ifo’s business climate index fell to a seasonally-adjusted 107.3 from 108.6 the previous month and below the 108.4 reading expected by economists.

Meanwhile, the current assessment index printed at 112.5 compared with 112.8 in December and missing expectations for a reading of 112.8.

The expectations index slid to 102.4 from 104.6 the previous month, falling short of expectations for 104.1.

SpreadCo analyst David Morrison said: “It’s a disappointment, undershooting the consensus expectation by more than a full point and also the lowest reading since this time last year.

“However, coming hard on the heels of last week’s dovish ECB statement, it does lift hopes that the central bank will announce further stimulus at its next meeting in March.”